FISCAL COMPACT

Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG), which is an agreement under international law, signed on 2 March 2012 by the Member States, with the exception of the United Kingdom and the Czech Republic. It has been adopted on the basis of a modification of the TFEU article 136. The Treaty entered into force on 1 January 2013, thanks to the ratification of twelve Member States, including Italy. The fact represents a result of a differentiated integration within the EU. The Treaty aims to safeguard the stability of the euro area and requires national budgets to be in balance or in surplus. This rule has to be incorporated into national law within one year of the entry into force of the Treaty, using provisions that are guaranteed to be adhered to throughout national budgetary processes. The rule will be deemed to be respected if the country medium-term objective as defined in the revised Stability and Growth Pact is met, with a lower limit of structural deficit of 0.5% of GDP. Any significant deviation from this objective shall cause an automatic correction mechanism. The parties of the Treaty are forced to implement suitable misures over a defined period of time.  The ratification of the Treaty is also an essential condition to access and benefit from the EMS. About the governance in the euro area, as expected in the Treaty, there will be informal Euro Summiti meetings, bringing together the Head of state or government of the euro area countries.

Source: european-council.europa.eu